Friday, May 05, 2017

The overall unemployment rate fell to 4.4 percent in April, tying the lowest level reached since May of 2001 as the establishment survey reported the economy added 211,000 jobs. With roughly offsetting revisions to the prior two months' job growth, this brings the average for the last three months to 174,000.

While the report on the whole is quite positive, one item especially worth noting is the increase in the employment-to-population ratio (EPOP) among prime-age men. The employment rate for prime-age workers edged up to 78.6 percent. This is a new high for the recovery, although it is still 1.7 percentage points below the pre-recession peak and 3.3 percentage points below the 2000 peak.

In April, the EPOP for prime-age women edged down to 71.9 percent, 0.9 percentage points below its pre-recession peak and 3.0 percentage points below its 2000 peak. However, the EPOP for prime-age men rose 0.2 percentage points to 85.4 percent. This is still 2.6 percentage points below its pre-recession peak and 4.1 percentage points below its 2000 peak, but the rise does suggest that there is still more room for EPOPs among prime-age men to increase. The fact that EPOP for both prime-age men and women remain below pre-recession levels and far below 2000 levels strongly suggests that the issue is a lack of demand in the economy and not a decrease in the ability or desire of people to work.

Interestingly, employment patterns do not appear to be following the story where benefits are going disproportionately to the most educated. Over the last year, the unemployment rate for college grads has not changed, while the EPOP is actually down by 0.3 percentage points from its year-ago level. At 2.4 percent the unemployment rate for college grads is much lower than for those with less education, but it is still 0.6 percentage points above its pre-recession low. By comparison, the unemployment rate for those with just a high school degree has fallen by 0.8 percentage points over the last year to 4.6 percent, while the EPOP for this group has risen by 0.8 percentage points.

The number of people involuntarily working part-time fell sharply to 5,272,000. This is a new low for the recovery, but still more than 800,000 above pre-recession levels. While the number of people involuntarily working part-time has fallen sharply since the implementation of the Affordable Care Act, the number of people choosing to work part-time is up by more than 1.8 million. In this vein it is worth noting that the number of incorporated self-employed is up by 8.2 percent in the first four months of 2017 compared with 2013.

If minimum wage hikes in many states and cities are leading to preventing teens from getting jobs, it is not showing up in the national data. Teen employment is up by 3.4 percent over the last year.

While the duration measures for unemployment all edged down, one discouraging area is the relatively low quit rate. At 11.2 percent it is roughly a percentage point below pre-recession levels and is 4.0 percentage points below the peak reached in 2000. Workers are still reluctant to give up jobs.

The big job gainers in April were restaurants (26,200 jobs), professional and technical services (23,100 jobs), local government (23,000 jobs), and health care (19,500 jobs). While the growth in restaurant and professional services were roughly in line with their longer-term trend, the jump in local government jobs is clearly an anomaly. Employment growth in health care has been somewhat slow the last four months, averaging 19,500 a month. This is down from 31,700 in the year up to December.

Retail added only 6,300 jobs after losing 27,400 in March. The sector is likely to remain weak for the near future. Construction employment has been virtually flat the last two months, after jumping by 88,000 in the prior two months. This fits the warm winter story.

There continues to be little evidence of accelerating wage growth. Year-over-year wages are up 2.5 percent, while they are rising at a 2.6 percent annual rate taking the average of the most recent three months with the prior three months.

On the whole, this is very positive report, but one that provides little evidence of the labor market overheating. The EPOPs suggest and quit rates indicate there is still considerable slack.

The overall unemployment rate fell to 4.4 percent in April, tying the lowest level reached since May of 2001 as the establishment survey reported the economy added 211,000 jobs. With roughly offsetting revisions to the prior two months' job growth, this brings the average for the last three months to 174,000.

While the report on the whole is quite positive, one item especially worth noting is the increase in the employment-to-population ratio (EPOP) among prime-age men. The employment rate for prime-age workers edged up to 78.6 percent. This is a new high for the recovery, although it is still 1.7 percentage points below the pre-recession peak and 3.3 percentage points below the 2000 peak.

In April, the EPOP for prime-age women edged down to 71.9 percent, 0.9 percentage points below its pre-recession peak and 3.0 percentage points below its 2000 peak. However, the EPOP for prime-age men rose 0.2 percentage points to 85.4 percent. This is still 2.6 percentage points below its pre-recession peak and 4.1 percentage points below its 2000 peak, but the rise does suggest that there is still more room for EPOPs among prime-age men to increase. The fact that EPOP for both prime-age men and women remain below pre-recession levels and far below 2000 levels strongly suggests that the issue is a lack of demand in the economy and not a decrease in the ability or desire of people to work.

Interestingly, employment patterns do not appear to be following the story where benefits are going disproportionately to the most educated. Over the last year, the unemployment rate for college grads has not changed, while the EPOP is actually down by 0.3 percentage points from its year-ago level. At 2.4 percent the unemployment rate for college grads is much lower than for those with less education, but it is still 0.6 percentage points above its pre-recession low. By comparison, the unemployment rate for those with just a high school degree has fallen by 0.8 percentage points over the last year to 4.6 percent, while the EPOP for this group has risen by 0.8 percentage points.

The number of people involuntarily working part-time fell sharply to 5,272,000. This is a new low for the recovery, but still more than 800,000 above pre-recession levels. While the number of people involuntarily working part-time has fallen sharply since the implementation of the Affordable Care Act, the number of people choosing to work part-time is up by more than 1.8 million. In this vein it is worth noting that the number of incorporated self-employed is up by 8.2 percent in the first four months of 2017 compared with 2013.

If minimum wage hikes in many states and cities are leading to preventing teens from getting jobs, it is not showing up in the national data. Teen employment is up by 3.4 percent over the last year.

While the duration measures for unemployment all edged down, one discouraging area is the relatively low quit rate. At 11.2 percent it is roughly a percentage point below pre-recession levels and is 4.0 percentage points below the peak reached in 2000. Workers are still reluctant to give up jobs.

The big job gainers in April were restaurants (26,200 jobs), professional and technical services (23,100 jobs), local government (23,000 jobs), and health care (19,500 jobs). While the growth in restaurant and professional services were roughly in line with their longer-term trend, the jump in local government jobs is clearly an anomaly. Employment growth in health care has been somewhat slow the last four months, averaging 19,500 a month. This is down from 31,700 in the year up to December.

Retail added only 6,300 jobs after losing 27,400 in March. The sector is likely to remain weak for the near future. Construction employment has been virtually flat the last two months, after jumping by 88,000 in the prior two months. This fits the warm winter story.

There continues to be little evidence of accelerating wage growth. Year-over-year wages are up 2.5 percent, while they are rising at a 2.6 percent annual rate taking the average of the most recent three months with the prior three months.

On the whole, this is very positive report, but one that provides little evidence of the labor market overheating. The EPOPs suggest and quit rates indicate there is still considerable slack.